How to increase your revenue with accounts receivables management

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    Credit control & accounts receivables

    How to increase your revenue with accounts receivables management

    Do you want to increase your revenue? If so, you should be looking into accounts receivables management.

    Businesses in North America lose 51.9% of the value of their B2B receivables that are not paid within 90 days of the due date and yet 93% of businesses report experiencing late payments from their customers.

    Additionally, the average company writes off 1.5% of their receivables as bad debt.

     

    There is a potentially disastrous disconnect between what businesses are owed, and what they are actually paid, and unearned revenue and accounts receivable mismanagement go hand in hand.

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    In this blog post, we will discuss some of the ways that you can use accounts receivable management to boost your business revenue. We will also provide some tips on how to get started with accounts receivable management.

    Encourage repeat sales with ‘thanks for paying the invoice’ messages

    This might seem like an inconsequential thing to do- but it really does make a difference. When a customer pays an invoice, they should receive an automated message thanking them for their payment.

    This is a great opportunity to include a coupon code or discount for their next purchase.

    You can also use this message as an opportunity to upsell other products or services that you offer, or simply remind them to contact you if they need anything else while including your phone number or email address where they can place a repeat order.

    By showing your customers that you appreciate their business, you’re more likely to encourage them to do business with you again in the future.

    Building positive customer relationships is an essential part of any business, but it’s especially important to increase accounts receivable revenue.

    When your customers feel appreciated, they’re more likely to pay their invoices on time and work with you to resolve any issues that come up.

    They know that you value their business and want to maintain a good relationship with them.

    Implement late payment fees

    If the thank you message is the carrot, then late fees are the stick.

    Most businesses have some form of late payment fee, and for good reason. Late fees give customers an incentive to pay their invoices on time.

    They also help offset the loss of accounts receivable revenue associated with late payments, such as lost interest, administrative costs, and bad debt write-offs.

    Consider using a tiered late payment fee structure. This means that the fee increases the longer an invoice remains unpaid.

    For example, you could charge a small fee for invoices that are 15-30 days overdue, a larger fee for those that are 30-60 days overdue, and an even larger fee for invoices that are 60+ days overdue.

    When implementing, ensure you apply late payment fees effectively and include the specifics on late fees in your accounts receivables policy, payment terms, and invoices, so that customers are aware of the details upfront. 

    Track and optimize receivables performance with KPIs 

    Improving your accounts receivable revenue is only possible if you have a good understanding of your current receivables situation.

    You need to track various accounts receivable KPIs (Key Performance Indicators) in order to get an overview of which areas need improvement. That’s why implementing accounts receivable KPIs can often be the first step to driving AR performance improvements that increase revenue.

    Some important receivables KPIs that you should track are:

    • Accounts Receivable Turnover Ratio
    • Average Days Sales Outstanding (DSO)
    • Bad Debt Ratio
    • Percentage of Receivables Past Due

    By tracking these KPIs, you will be able to see which areas need improvement in order to increase your accounts receivable revenue.

    For example, if your Accounts Receivable Turnover Ratio is low, it means that you are not collecting your receivables fast enough and you need to improve your collections process.

    On the other hand, if your Bad Debt Ratio is high, it means that you are extending credit to customers who are not paying their bills on time, and you need to tighten up your credit policy, implement stricter credit limits, and consider running credit checks as part of your customer onboarding process to help protect your business from bad payers. 

    Once you have identified the areas that need improvement, you can put together a plan to improve your accounts receivable management and, as a result, increase your revenue.

    Utilize debt recovery 

    As we've already mentioned, the average company writes off 1.5% of their receivables as bad debt. That might not sound like much on the page, but if your company has a turnover of $100 million, that's $150,000 down the drain each year.

    Rather than writing off bad debts in your business, once you have exhausted all other options and your customer has still not paid, we recommend escalating these invoices to a reputable debt recovery agency.

    When choosing a debt recovery agency, it's vital that you do your research on the debt recovery process. You want a debt collections supplier that takes a polite approach to debt recovery, so you can recover the funds that are owed to you without ruining your relationships with your customers.

    For example, with the right debt collections supplier businesses like the Huttie Group were able to recover over 15,000 GBP in old debt that would have otherwise been written off!

    Proactively follow up on late payments 

    Once you've got a system in place for managing your accounts receivables, it's important to be proactive about following up on late payments.

    Communication is key when following up on late payments.

    You should reach out to your customers as soon as a payment is overdue, and again at regular intervals until the debt is paid.

    Before you even send out the invoice, you should contact the customer with all the required payment information and make sure they are aware of your expected payment terms in advance.

    As soon as the invoice is overdue, reach out to the customer via email, follow up on payments over the phone, or both.

    Be polite but firm in your communication, and always keep a record of your correspondence. Make sure your reminders have a clear call to action, and that you include the amount outstanding and the date by which payment is due, as well as all other pertinent information.

    One way to reduce late payments and get paid faster to improve your business’ revenue is to add SMS payment reminders to your follow-up process. SMS messages have an open rate of 98%, allowing you to cut through the noise and reach customers on the go with ease.

    Letting customers pay invoices instantly via a link in their SMS payment reminder means a better customer experience and helps you get paid faster.

    Automate manual tasks

    Once you have your KPIs in place, there is a good chance that you'll notice your operational cost per collection is high. This is often caused by the staff hours spent on manual tasks, like sending emails and tracking invoice information across multiple systems and emails.

    You can automate many of these tasks with modern software, which will save your team time and money in the long run, and free up your team from working on repetitive tasks.

    Consider using a dedicated accounts receivable management software that offers features like automatic payment reminders, online payments, and payment communication tracking.

    Using automation helps reduce the amount of time your team spends on administrative tasks, so they can focus on more strategic tasks that will help increase revenue.

    For example, fashion wholesaler LoveBrands saved over 15-hours per week by implementing accounts receivables automation and were able to reduce its team size from a large group of external contractors to just two internal staff members managing the AR function.

    This saved considerable costs and increased revenues for the business! 

    Increase your revenue with accounts receivables software

    If you want to increase your revenue, it's important to consider the way you manage accounts receivables at your business. 

    Making sure you have a robust system in place to manage invoicing, payments and collections is crucial to ensuring you get paid on time and can maintain a healthy cash flow.

    Implementing this kind of proactive and detail-oriented workflow doesn't have to increase your operational cost per collection.

    Softwares like Chaser can automate the accounts receivable processes and help you get paid faster. Implementing a system like this can free up your time and resources so you can focus more time on growing your business.

    With Chaser, for example, you can automate personalized payment reminder emails, credit check customers, track all payment communications in one location, and set up payment plans so you're always getting paid on time.

    Get invoices paid faster and reduce team hours on manual tasks, without losing the personal touch with your customers. Try accounts receivables automation software for free, for 14 days with Chaser.

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